Mr GREGORY (Swan)
.- The honorable member for Werriwa (Mr. Lazzarini), who has just given a lengthy dissertation upon the evil conditions which he says exist in many Australian cities, also endeavoured to show the horrors of what he terms modern civilization. During the whole of his speech, in which he dealt at length with the manner in which credit can be provided, he failed to mention work. I should like to remind the honorable member that it is only by work that wealth can be produced, and that unless we produce wealth

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there can be no prosperity. His fatuous proposals to obtain something for nothing out of a printing press must end in chaos. He demands unlimited notes and credits, and admits that his limit is the sky. Where would this end? If the financial policy which he advocates so strenuously would be of any use to the Australian community, why was it not introduced some years ago when the party of which he is a supporter had a majority in this chamber '( I have in my possession a 5,000,000 mark note which, shortly after it was issued, was not wor th the paper on which it was printed. The honorable member also referred to the associated banks and the manner in which our banking system is conducted, but every one knows that these banks have not within their vaults sufficient money to meet the demands of all the depositors. Banks make their advances on securities and, particularly, government securities. If business were not conducted in that way, it would be utterly impossible for any banking institution to function. The depositors have confidence in the banking institutions with, which they deal, and confidence is the basis of the whole credit system. Destroy that and a collapse is inevitable.

I listened with a great deal of attention to the interesting speech of the right honorable member for Yarra (Mr. Scullin), who suggested that a special session of Parliament should 'be held to consider alterations of the Constitution. In the course of his speech, he came back to the policy of unification which he has previously advocated on many occasions.

Mr Mahoney
- That is a policy in which a large section of the people believe.

Mr GREGORY
- We shall wait to see if that is so. The right honorable member for Yarra believes that this Parliament should have absolute control in many matters and that the States should not have the right to control their own every-day affairs. Some persons, particularly those who live in the crowded cities, may believe that there is a good deAl to be said in support of such a policy, but those who represent the less populous States, some of which are more or less isolated, hope that a majority of the Australian people will not agree to such a proposal. Under a system of unification, with representation on a population basis, it would be a question of God help the lesspopulous States and particularly "those which have huge areas to develop. The Attorney-General (Mr. Menzies J also stated quite definitely that a special session of the Parliament would be held next year to consider alterations of the Constitution. It is interesting to recall that when the right honorable gentleman was a member of the Victorian Parliament, he told quite a different story. He then strongly opposed unification because he did not believe it would be in the interests of the nation. The Commonwealth is trying to assume powers which the Constitution has not given to it, and ever since the inception of federation the Commonwealth has been responsible for breaches of the Constitution. For instance, it was never intended that the Commonwealth should pass laws to control arbitration -within a State, but by a legal trick it has obtained that power. Has any honorable member studied, even for a moment, the huge Health Department which the Commonwealth has established, and the expenditure which it incurs? Under the Constitution, the Commonwealth has no power over health; it can deal only with quarantine matters.

Mr Rosevear
- Does the honorable member object to the Commonwealth expending money in order to preserve the health of the people?

Mr GREGORY
- That is not the question. I am saying that the Commonwealth has not the constitutional power to deal with health. The Commonwealth had not the constitutional power to control aviation. When an appeal was made to tho people some time ago, they declined to give the Commonwealth the power it sought in that respect. I urged the people to record an affirmative vote because I considered the Commonwealth should have the power, but it serves to show that the electors have little confidence in this Parliament. In order to enable aviation to be effectively controlled and to secure uniformity, the States have now agreed to permit the Commonwealth to exercise authority under powers provided for in the Constitution.

Mr Rosevear
- Some of the worst air disasters have occurred on routes under Commonwealth control.

Mr GREGORY
- I am dealing with authority, and not with responsibility. If the people knew the manner in which parliamentary business is conducted in Canberra, they would hesitate to give this Parliament additional powers. Only a fortnight ago, when the Deputy Leader of the Opposition (Mr. Forde), in the absence of the Leader of the Opposition (Mr. Curtin), was speaking on the budget, there was only one Assistant Minister on the ministerial bench and there were only one or two other members on the ministerial side of the chamber. When the Commonwealth Parliament met in Melbourne, the ministerial bench was usually occupied by a number of Ministers who heard the views expressed by the representatives of the people. Then the public eye was upon them, and they did hot dare to flout the Parliament in the way they do here. Their attitude is followed by honorable members, with the result that the chamber is nearly always empty -when important questions are being debated. Honorable members speak in this chamber to bring before Ministers the views -they hold on important topics debated in this chamber, and not solely to have their speeches recorded in Hansard. When the Attorney-General wa3 speaking on the advantage to be gained by granting additional constitutional power to the Commonwealth, I informed him that in the United States of America Mr. Coolidge had pointed out the grave dangers of bureaucratic control and that because something needed to be done it was not necessary that the Commonwealth Parliament should do it. When Parliament is not in session Ministers are seldom in Canberra. It would be deplorable if many of the powers which are now enjoyed by the States were handed over to a bureaucracy. The AttorneyGeneral said that the States do not possess any sovereign powers. I remind him that sovereign powers are in the hands of the people. When the Labour party was in power, it introduced a measure to alter the Constitution in certain respects, and had that bill passed through both branches of the Legislature and been approved by the people by way of a referendum, the Constitution could have been altered whenever the Government desired, without further reference to the people. That preposterous proposal was submitted by a party whose' slogan is, " Trust the people ". The framers of the Constitution took particular care to provide that the Constitution could be altered only by the votes of a majority of the electors in a majority of the States. The Labour party also believes in the abolition of the Senate, which was set up to protect the rights of the people, and had their proposals been carried it could have abolished that chamber without any reference to the people. The AttorneyGeneral, who said that the Commonwealth Parliament should have the power to pass legislation to control company law, knows that it has this power, but it has not power to control the industrial work of the companies. He also suggested that this Parliament should control agriculture. "What a sorry mess would follow if this Parliament had any voice in the development of the States. The history of its failures and waste in the Northern Territory is too apparent to think twice of giving it control of agriculture. I was at Coolgardie when gold was first discovered, and I recall the activity displayed by the late Lord Forrest in making provision for the construction of roads, dams, water supplies, bores, telegraph lines, and railways. AH of this work was completed within a couple of years, and was followed shortly afterwards by the great Coolgardie water scheme. "Would such important works have been undertaken under a system of unification, with control at Canberra? I believe that the Commonwealth should have control in some matters such as wireless broadcasting and aviation, which could not be foreseen when the Constitution was framed.

I now propose to deal with the subject of defence. I am surprised to find thai Ministers who have recently visited England and the Continent have not mentioned the horrors of war and the imminent danger which exists in Europe to-day. Only a few days ago a friend in Melbourne sent my wife a letter which she had received from her daughter who lives about 25 miles distant from London. She told of the anxiety and horror, particularly amongst the women and children of England, recently occasioned by the fear that, at any moment, enemy aeroplanes might drop bombs and spread poison gas to create fear and horror among the people. She said that conditions in England were absolutely appalling, that no one knew from one hour to the next when war would break out. Those Ministers who have recently returned to Australia from abroad, with a first-hand knowledge of the anxiety which exists in the minds of all the people of Great Britain at the present time, should do everything in their power to awaken the people *of Australia to the dangers that recently confronted, and to a modified degree still confront them. In a book which he recently published, Professor Berriedale Keith, an international authority in Great Britain, referring to the attitude of Mr. Baldwin during the recent crisis, wrote -

A very important declaration of his conception of the duty of a government by Mr. Baldwin on November 12th, elaborated on November 18th, revealed to a rather astonished world the fact that he had realized two years earlier the deficiency of British defence preparations but had not attempted to remedy them because of the risk of loss of popularity and of seats at the general election. His doctrine, however, seems to have satisfied his followers and to go far to establish the principle that leaders should follow rather than seek to guide public opinion. The plausibility of this theory, if restricted to thu sphere of domestic affairs, disappears when applied to external relations, for it is in the nature of things inevitable that the public has far too little knowledge of foreign relations to be able to form any intelligent judgment as to the needs of defence, and that it is peculiarly incumbent on ministers in all matters falling within that sphere to take the initiative even at the risk of unpopularity.

In my opinion it is the duty of every honorable member in this Parliament, irrespective of the party to which he belongs, to point out in a convincing manner to the people of Australia the danger which lies ahead and the absolute necessity for defence preparedness. [Quorum formed.'] There is no desire on the part of anybody in Australia for war; we want peace all of the time; but can we hope to secure peace if we are not prepared to defend this country? What is surprising to me is the attitude of the pacifists, particularly in the Old Country, who, while they urge that no provision should be made for defence, in their so-called desire for pacificism would plunge Great Britain into a war in Spain or Czechoslovakia. Those who wait to be attacked are already half defeated. We should shudder at the prospect of placing untrained lads in the firing line to confront an enemy consisting of trained men. I have always supported compulsory military training, and to my mind it is dreadful to think that the young men of our volunteer army should ever be ex:pected to stand up against the trained troops of an enemy. Compulsory military training is of great value even in an era of peace. The trainees are subjected to a form of discipline which has a very steadying effect upon them. During the depression from which we have recently emerged, I recommended that, as a means of getting them away from the dangers of idleness in the big cities, our workless young people should be given employment half time on military training and half time on afforestation work. Anything would have been better than to allow our young men to live in idleness week after week, and in some instances, year after year, with no prospect before them of ever being able to secure employment. When a man reaches the age of 25 years without having secured a job he will not want to work for the rest of his life. My -proposal would have ensured work, wages and training with good prospects of "work later under better conditions. We have a great country and it is our duty to do everything to defend it. Bismarck said " Only fools can talk facts away ". The real fact which we must broadcast to the people of Australia is that their first duty is to populate and develop their country. Nations, like individuals, need a fair share of the earth's natural resources. Others are aware of the immense area of Australia and of its wonderful possibilities. This country is capable of maintaining under good conditions a population varying from . 23,000,000 to 30,000,000; but owing to the wretched policy we have adopted under which we prohibit the export of our raw materials to countries hungry for them, and impose serious restrictions upon trades and immigrants, we antagonize countries that otherwise would be friendly to us. Australia has an area equal to that of the United States of America, and whilst it could not support such a huge population as the United States of America, it could, in the opinion of every economist who has devoted his attention to the subject, safely carry a population of-from 25,000,000 to 35,000,000. In addition to the disadvantage of our meagre population, we have a declining birth-rate. In 1911, with a population of 4,450,000, the birth-rate was 122,000 ; in 1921, with a population of 5,435,000, the birth-rate had increased to 136,000; in 1931, with a further increase of the population of 1,000,000, the birth-rate declined to 118,000; in 1934, with a population of 6,700,000, the birth-rate dropped still further to 109,000; and in 1936, with a population of 6,800,000, the birth-rate was only 116,000. The birth-rate in Australia was 16 per cent, as against 42 per cent, in Russia, 31 per cent, in Japan, 25 per cent, in Italy, 18 per cent, in Germany, and 15 per cent, in Great Britain. In spite of this declining birth-rate we have adopted a White Australia policy, applied restrictive tariffs, brought in a trade diversion policy and restricted immigration. Manufacturing and Labour groups call for still further restrictions. The question which must arise in the minds of people from other countries is: " Are Australians doing all they can to people and develop their country ? " The answer must be " No ": Therefore these people have a perfect right to assume that if we are not prepared to populate and develop our country we have no right to continue to hold it in face of the need of other countries for possessions to absorb their surplus populations.

I come now to the question of finance. I shall not go into great details in regard to public expenditure, but shall confine myself to -finance in respect of public administration. In my opinion this is no time for large increases of administrative expenditure. In two short years from 1936-38 administrative expenditure increased as follows: -

These figures reveal some rather alarming increases. Heaven only knows what the administrative expenditure on the Department of the Treasury will be next year when the national insurance scheme is brought into operation. I strongly urge that the National Health and Pensions Insurance Act should be suspended for, some years and drastically amended before being put in operation. I do not question the large increase of the vote for the Defence Department because I realize that it is necessary as the result of the new defence policy. In my opinion it is absolutely essential that the economic position should be exhaustively examined so that there will be no prospect of our drifting back to the depression conditions of 1930. [Quorum formed].

Che honorable member for Riverina (Mr. Nock) pointed out yesterday that our receipts from wool this year would be £6,000,000 less than last year, and from wheat £20,000,000 less; and that in consequence of droughts our flocks of sheep would be reduced by 20,000,000. He also told us that commodity costs had increased by 6 per cent., whereas export values had decreased by 20 per cent. 1 reiterate these facts because of the important bearing they have upon our whole financial structure. It is admitted that wool production is unpayable at present prices, and that in consequence of drought and low export values, the wheat industry will be a burden instead of an assistance to the Treasury. With commodity costs increasing in this way ruin seems to be facing our primary producers. I remind honorable members of the old saying : " Whom the gods arc about to destroy they first make mad". We seem to be facing destruction, for our whole economic policy is mad.

I fear that the general community does not appreciate the value to the country of our export trade. Iri the four years from 1925-26 to 1928-29 inclusive, our exports were valued, on the average, at £143,000,000 sterling per annum. In the next four years, from 1929-30 to 1932-33, export values declined to £105,000,000 per annum sterling; but from this amount we must deduct £54,000,000, held in gold in the bank vaults, which was sent to England to pay debts there, and not to create credits. To be accurate, therefore, we must put down the export value of our goods during those four years at £92,500,000 per annum, and it will be seen that we suffered a reduction of £202,000,000 in the four years, or an average of over £50,000,000 a year. This meant a definite and an enormous loss of spending power. In the years when our exports were valued at £143,000,000 per annum, it is probable that the spending power of the people, owing to the volume and circulation of that £143,000,000, was between £600,000,000 and £700,000,000 per annum. In the next four years, an extremely serious fall of the purchasing power of the people was caused by our average loss of £50,000,000 per annum in export values. It was this great reduction of export credits that was mainly responsible for the depression and the misery that followed. In the four years' from 1933-34 to 1936-37, the average value of our export goods was £133,000,000. Export values showed an increase in 1936-37 to £161,500,000. In 1937-3S our exports were valued at £157,000,000. These facts indicate beyond question that the depression was caused by the reduced export values, and relieved by the increase during the last four years ; but I fear that, unless we are extraordinarily careful to keep down administration costs and other governmental charges, we shall find ourselves in the depth of another depression.

I wish now to deal for a few moments with my own fiscal policy. This is well known, although I get very little support for it in this chamber. 1 consider that it is vitally necessary that we shall do our utmost to develop trade with other countries of the world. The greatest menace to world peace is the restriction of world trade. If we could remove these trade restrictions and carry to its consummation the courageous policy now being enunciated by Mr. Cordell Hull of the United States of America, I believe we should pave the way for real peace throughout the world. There is an urgent need for greater freedom of trade than is possible at present. We must be prepared to trade. freely with other peoples, and we must not deny other nationals access, under reasonable conditions, to the raw materials that they need.

Unfortunately, the costs of production in Australia continue to increase. The honorable member for Riverina referred last night to certain extraordinary increases of duties that have resulted in consequence of the policy of this Government. I regret that the duties provided in the last tariff schedule to be tabled in this Parliament have been made effective for another six months, although the items affected have not been the subject of inquiry by the Tariff Board. The action of the Government in connexion with hinges, referred to last night by the honorable member for Riverina, constitutes one of the most deliberate frauds ever imposed on an unsuspecting public, that existing duties were increased without any reason whatsoever being given from 65 per cent, to more than 300 per cent. This emphasizes my contention that the law should be enforced and that the Minister for Trade and Customs should not be permitted to table any increase of duties unless the item has been reported upon by the Tariff Board. In this case, contrary to law, the Minister has had imposed the most extravagant and unjustified duties, apparently at the request of some interested person. It is regrettable that Parliament should have forgotten certain details in the report published by the economists who inquired into the economic effect of the Australian tariff in 1928. I direct the attention of honorable members to page 191 of that report which gives figures relating to specified items, covering salaries and wages paid in the industry, and the excess cost involved if the whole of the duty in respect of these items were added. To these details I have added another column showing the amount of duty in excess of the salaries and wages paid in the industries concerned. The table is as follows : -

It should be remembered that these figures are based on the duties in force in 1926 and 1927. Enormous increases have been made on most if not all of the items affected since that time. I hope that in the near future the Government will realize that primary production is not a huge reservoir from which limitless funds may be drawn by way of either direct or indirect taxation. Unless something is done to protect the interest of the great primary producing industries of Australia, the whole country will face ruin. At the important trade conference held in Rome recently it was unanimously agreed that the prosperity of primary industries was essential to the national welfare of any country. I therefore hope that the Government will show some consideration to this vital fact, and pay closer attention to the well-being of our primary industries than it has hitherto done.

My final words have relation to defence. I hope that the Government will not hesitate to proceed with its full defence programme. I hope, also, that the members of the Cabinet 'who believe in compulsory military training will stand firm, even though an appeal to the country may be involved. If the people of Australia are brought to realize the urgent necessity to train our men to defend the country - and this does not mean conscription - I believe that they will give the Government a mandate to proceed with its policy. {Quorum form.ed.']